Monthly Archives: July 2012

After yesterday night’s post on a somewhat soft topic, let’s get back to business with the CFA exam results I received today.

Let’s kill the suspense straightaway! I am delighted to be able to say that I passed my Level I exam. That’s great news and it’s a huge relief as I am always unsure of the outcome of this kind of exams.

The CFA institute does not provide you with your exact score but rather gives you a range of success ratio for each specific topic.

Unsurprisingly, I didn’t manage to do more than 50% in Economics as the topic is very broad relative to the number of questions that are actually asked, but I’ll try to work on that a bit during this summer. That was for the weak range.

Then comes what I’d call the middle range with 51% – 70% success ratio within which my scores in Derivatives, Fixed Income and Quantitative Methods all lied. That might come as a surprise for some of you as they should be some of my strongest topics, but I think it can be explained by the kind of questions that were asked during the exam. Indeed, questions in these topics were not very quantitative and sometimes relied on terminology or specific definitions. I guess this is where I lost my points because I am fairly confident of the computations I performed.

My scores for the remaining topics ended up in the upper bracket with more than 70% success ratio. I am pretty happy about this because it seems that I got the feeling right in Ethics which is a topic which requires practice, practice and… practice. I’m particularly satisfied to have obtained such a score in Accounting as it is a key topic in the Level I curriculum because of the number of question being asked about it in the exam. I must say, I felt most Accounting questions were really doable since difficult topics such as deferred tax assets/liabilities were represented with relatively easy (or at least quite straightforward) questions.

To sum up my Level I experience, and as I had the time to look back at what I did before they exam and how it paid up, I would like to highlight the importance of having the Schweser notes and particularly the Schweser QBank (the tool which contains tons of practice questions for each topic). Practicing questions definitely looks to be the right way to be successful in the exam, at least for people with a professional activity during the day who have less time available for the exam. Focusing on the key exercise types where easy points can be made by remembering a formula (or at least a process) proved to be a very useful technique at the exam as it secures points, saves time and provides confidence.

I would like to end this post with a word of thanks for those who supported me during my journey towards this CFA Level I exam success. First of all, I would like to thank Unigestion, the company I work for, for trusting me and supporting me as well as providing me with some extra training time. In particular, I would like to thank Pierre Bonart who encouraged me to start this curriculum and who provided me with great advises and showed so much support. I would also like to thank my family and my girlfriend Sarah for helping me mentally and for standing by me during the difficult and stressful pre-exam days and for their great understanding during the whole preparation process.

Finally, I want to underline that I do know that the road to the CFA is far from over, and that this was maybe the easiest step towards the designation. I will be back with more CFA content, this time concerning Level II material, when I receive the new set of notes for the next challenge in June 2013.

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I decided to take a few minutes to write this post as I witnessed today two incredible things as I went to the Swiss premiere of “Batman: The Dark Knight Rises”.

First of all, the movie itself; it’s astonishing. I really liked it. I don’t usually go to the theater to watch movies these days as I think the quality is not worth the price anymore in most cases. However, as I’m a big fan of Batman, especially of the latest trilogy – and especially the last opus -, I just couldn’t resist. The last time I remember enjoying a movie in a cinema was for “Batman: The Dark Knight”, and I was really scared to be disappointed by this one. Obviously, I wasn’t; it was 160 minutes of mind-blowing sensational action combining surprise and emotion. I’m not gonna spoil any of it, trust me, just go and watch it.

As we all know, the release of the movie was overshadowed by the atrocious killings that occurred in the US at the premiere a few nights ago. I fully understand the emotion that can arise from such tragedy but today I witnessed a clear example of human irrationality and misinterpretation of available variables. Let me explain. As we entered the theater, there were a few security guards searching people for, I suppose, weapons and tear gas. Seriously, how ridiculous is that?

If we analyze mathematically the reasoning beyond such a pathetic display, we see the following steps. A guy, who is mentally unstable, in a country where you are allowed to buy weapons and who was just dumped by his girlfriend killed a dozen people and injured 50 in a movie theater at the premiere of a Batman movie. A year ago, Anders Behring Breivik, also remote to the society, killed even more people on an island. A few years back killings occurred at the Columbine High School. What are the common variables here? Well, from what I’ve witnessed today, some people think that the movie where the killings occurred was a determining variable.

It is really incredible how irrational people can be and it is another great example of how we can miss the big picture by focusing our attention on some noisy irrelevant variables. You can clearly see this happens in financial markets: even though the macro-economic outlook is bad, a single speech can trigger a market rally which will of course turn around straightaway as the underlying fundamental problem was not solved.

This is my food-for-thought of the day, but it might really be the ultimate problem of our modern society. I don’t pretend to be able to enumerate what the reasons behinds the various killings are, but I would certainly not look at the specific movie that was shown in the movie theater when the tragedy happened. Maybe the guy had a blue shirt, maybe the guy ate a cheeseburger that day, should we avoid blue shirts? should we stop eating cheeseburgers?

A theory which I think is really plausible, is that these catastrophes occur purely randomly: you just can’t predict them, it’s just noise. Whichever source you might identify – video games, violent movies, political regimes, financial systems, social unrest, poverty – and even if you removed them all, it is possible that some individual are just inherently bad and will provoke chaos. I will add a few quotes from the Joker in “Batman: the Dark Knight” which illustrate the kind of personality I’m referring to:

[The Joker] I just did what I do best. I took your little plan and I turned it on itself. Look what I did to this city with a few drums of gas and a couple of bullets. Hmmm? You know… You know what I’ve noticed? Nobody panics when things go “according to plan.” Even if the plan is horrifying! If, tomorrow, I tell the press that, like, a gang banger will get shot, or a truckload of soldiers will be blown up, nobody panics, because it’s all “part of the plan”. But when I say that one little old mayor will die, well then everyone loses their minds!

[The Joker] Introduce a little anarchy. Upset the established order, and everything becomes chaos. I’m an agent of chaos. Oh, and you know the thing about chaos? It’s fair!

[The Joker] Do I really look like a guy with a plan? You know what I am? I’m a dog chasing cars. I wouldn’t know what to do with one if I caught it! You know, I just… *do* things.

I guess everybody can choose his theory: either catastrophes are completely random or you can try to predict it. It’s like in financial markets: either markets are efficient (and you should just optimize you risk adjusted return) or they are not (and it makes really sense to do some active management).

In anyway, the bottom line is: focus on meaningful variables, and forget the noise.